Columbia Banking System’s 13.3% return over the past six months has outpaced the S&P 500 by 6.6%, and its stock price has climbed to $32.22 per share. This run-up might have investors contemplating their next move.
Is there a buying opportunity in Columbia Banking System, or does it present a risk to your portfolio? Check out our in-depth research report to see what our analysts have to say, it’s free.
Why Is Columbia Banking System Not Exciting?
Despite the momentum, we’re sitting this one out for now. Here are three reasons we avoid COLB, plus one stock we’d rather own.
1. Lackluster Revenue Growth
Long-term growth is the most important, but within financials, a stretched historical view may miss recent interest rate changes and market returns. Columbia Banking System’s recent performance shows its demand has slowed significantly as its annualized revenue growth of 9.6% over the last two years was well below its five-year trend. 
Note: Quarters not shown were determined to be outliers because they were impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.
2. EPS Trending Down
We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.
Sadly for Columbia Banking System, its EPS declined by 2.1% annually over the last five years while its revenue grew by 32.9%. This tells us the company became less profitable on a per-share basis as it expanded.
3. Substandard TBVPS Growth Indicates Limited Asset Expansion
Tangible book value per share (TBVPS) serves as a key indicator of a bank’s financial strength, representing the hard assets available to shareholders after removing intangible assets that could evaporate during financial distress.
To the detriment of investors, Columbia Banking System’s TBVPS grew at a mediocre 9% annual clip over the last two years.
Final Judgment
Columbia Banking System isn’t a terrible business, but it doesn’t pass our bar. With its shares outperforming the market lately, the stock trades at 1.2× forward P/B (or $32.22 per share). This valuation is reasonable, but the company’s shakier fundamentals present too much downside risk. We’re fairly confident there are better stocks to buy right now. We’d suggest looking at one of our all-time favorite software stocks.
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